File sharing and Toffler’s two economies – a larger perspective

Some of you who are interested in what is happening in file sharing and the fight between the media industry and the rest of the world may have noticed the raid on the immensely popular BitTorrent directory Pirate Bay a couple of weeks ago. It turned out that the raid a result from pressure from United States and US media companies on Swedish authorities. The whole media industry was in heaven. At least for a while. In two days the site was up and running again and after a week or so the Swedish political parties were starting to realize some of the possible consequences this path might have. Almost all political parties are now discussing how to meet all these young people for whom file swapping have turned into a broad cultural behavior.

I believe that the major problem with this conflict is that most of this discussion have been taken place on the lower level of abstraction where laws and regulations are the foundation and not on the higher levels where laws and regulations are just consequences of deeper values. What if we raise this discussion to higher levels?

We usually blame this discontinuous change on technology and say that the digital technology is fundamentally changing the way we relate to a lot of things in the world. By changing how we distribute, duplicate and process things with the slightest relation to the digital domain we are rebuilding large parts of the world from the bottom up. The problem is just that we as society seems unable to grasp how deep these changes will go into all parts of human activities and systems.

But this view haven’t seemed to reach any interesting conclusions or larger scale views on what is happening in our society. It just make predictions impossible because technology seems to change everything and makes us talk about singularities and other ways of explaining that we can’t predict anything anymore.

Another way of looking at this struck me when listening to Ed Driscoll’s podcast interview with Alvin Toffler about his new book Revolutionary Wealth which is as usual written together with his wife Heidi. In the interview Toffler is among other things talking about prosuming and the monetary economy versus the non-monetary economy. It comes to no surprise to most of us that a lot of value is created without any money changing hands. Most of us are sometimes cooking, painting rooms or repairing something in our house without paying or charging anyone for it. These are legal value creating activities which never show up in the GDP calculations but are nevertheless important pillars of our society. This phenomenon could according to Toffler be described as a shadowy non-monetary economy besides the monetary economy.

The point is that a society is based on both these two economies but the border between them is not solid but consists of countless pipes and semi permeable filters. It is a very complex relation since many of our daily decisions and actions are moving values between these two economies we are only measuring one of the them – the money economy. Think of the decision to repair your car yourself or go to a repair shop. In spite of this economist are to a degree of 99.999% just looking at the money part of the economy. Toffler compares this behavior to a doctor who just examines one of two lungs.

Our decisions on both personal and large scale commercial level are of course based on what possibilities we have and see. These possibilities are changing when our ideas, our knowledge or our technology is changing. One example of this shift is when an innovative person find a new way to charge for something that previously was free – think of charging for bottled water. An example of a value transfer in the other direction is according to Toffler occurring in the transition from chemical photography to digital photography. Instead of buying a service and send the film rolls to a Kodak lab to develop them, and get the paper prints back a week later, we don’t any longer pay for most of the pictures we take. We just display them on our computers and if we want a paper copy we print them on a printer ourselves. Technology have reduced the need for photo labs and consequently moved value creating work from the monetary economy to the non-monetary economy. Another and probably more obvious example is the ATM machines where everybody who do transactions themselves is doing a job previously being done by a teller. Toffler calculates that the american users of ATM machines are doing value creating work in the non-monetary economy which with the old logic would be performed by 200 000 tellers in the monetary economy. The result is that technology have helped us outsourcing 200 000 bank jobs, not to India or China, but to the customers, who Toffler call prosumers. At the same time the value creation is removed from the monetary economy and the GDP.

Since the increased knowledge levels and new technology step by step is empowering ordinary people to do value creating work themselves Toffler predicts that we will see an explosion of value creation in the future. If we look into future we can see endless hoards of new fantastic machines that will enable us to do even more more value creating work ourselves. I have e g previously written about desktop factories in this blog (in swedish), which is just another example of increasing the possibilities for the individual in the future. Most of this growth will take place outside of the monetary system and will not be visible in the balance sheets of our companies or societal institutions.

This points in the interesting direction that technology development might not be the major problem, our idea of economy and its relation value creation is.

Now we can turn back and look at the file swapping phenomenon. If we look at it with Toffler’s eyes it is a natural part of a much larger megatrend than just an effect of the last decades of digital development. It is a part of a transition from short historic period when money was the fundamental measurement of value into a period with a much broader, and maybe even holistic, definition of value. Money will probably be regarded as basically one of many innovations which provided a generic value container with practical use in some situations.

In my head I can see countless other questions popping up as a result of this chain of thought:

  • When we see the flattening GDP growth curves in the world economy (at least outside India and China), is that a direct sign that the monetary system is losing in relative importance in favor of the non-monetary system?
  • Is this the beginning of the end for the era of corporations, which is a human innovation which completely lives and is defined in the money economy? Since the flow of value between the two economic systems seems to be largely uncontrollable over time, so will the existence of a specific value creation process when it comes to earning real money from it.
  • If this transition is going on, how will it affect the huge imbalances of economy between the rich and the poor which have increased enormously the last century?
  • Will a change to this view of economy and value creation be instrumental in changing our obviously increasingly obsolete view of labour?

And before you comment on this, yes I suspect that these thoughts are connected to Jeremy Rifkin’s book End of Work which I haven’t read (yet).